FLINT, Michigan -- Your hometown bank might be looking to make a little bit of money from off of your tax dollars.

Flint-based Citizens Republic Bancorp Inc. received a $300-million shot in the arm last month as part of the federal financial bailout known as the Troubled Asset Relief Program. But not much of it that infusion has made its way into the hands of consumers and businesses.

Flint Journal extrasFunding infusion

Michigan-based banks that have received or have been approved to receive Capital Purchase Program funding through the Treasury Department.

• Citizens Republic Bancorp Inc., Flint. :$300 million.

• Independent Bank Corp., Ionia: $72 million.

• United Bancorp Inc., Tecumseh: $20.6 million.

• Firstbank Corp., Alma: $33 million.

• Flagstar Bancorp Inc., Troy: $266 million*.

• Michigan amount approved to date: $691.6 million.

• Total amount invested through late January: $194.2 billion.

* Final approval is subject to certain conditions.

Sources: U.S. Treasury Department and banks

The head of the state's largest bank-holding company that operates Citizens Bank said that because there isn't demand to loan the $300 million out all at once, the bank is temporarily investing its Capital Purchase Program money in securities.

The securities can be used as collateral "we can borrow against so we can make loans," said Bill Hartman, the company's outgoing president and chief executive officer.

Citizens Republic is just one of a handful of Michigan-based banks to receive approval for the Treasury Department funding.

Some $194.2 billion has been invested in 317 financial institutions across the country and in Puerto Rico through the program that was intended to help banks make loans to consumers and businesses. Treasury will purchase up to $250 billion of preferred shares from qualifying financial institutions.

The Federal Deposit Insurance Corp. in a January financial institution letter said banks that have received federal fund injections should be able to explain how participating in such programs has helped their lending efforts and helped borrowers avoid unnecessary foreclosures.

"The FDIC encourages institutions to include a summary of this information in shareholder and public reports, annual reports and financial statements, as applicable," the letter says.

Hartman said it would be difficult to account for just how much of the $300 million so far has been loaned out to businesses and consumers.

He said Citizens Republic may be able to comment more specifically about the use of the funds after the next quarter ends in March.

"We're very much in the lending business and I think it's important all our clients and shareholders realize that," he said.

In fourth quarter 2008, Citizens Republic made $305 million in new loans, $135 in commercial loans and $170 million in consumer loans. Another $300 million in loans were renewed during the quarter.

"We're open for business and very much willing to lend in this environment," Hartman said. "The money we received from the government, the $300 million, will permit us to be a willing lender."

And because the government money comes with a price (banks essentially pay 5 percent on the money per year for five years and 9 percent a year thereafter), investing the money is common, said one banking analyst.

In Citizens Republic's case, the $300 million infusion costs some $15 million a year.
"It's very common for those banks that receive capital ... to make some money off it," said Terry McEvoy, an analyst with Oppenheimer & Co. Inc. in New York.

McEvoy said banks that prudently invest the money to help offset some of that cost are serving shareholders' best interests. He said the money also is easily accessible to lend to credit-worthy borrowers.

"You just can't immediately lend that money out overnight," McEvoy said. "It's going to take some time to put that capital to use."

Hartman said there is less demand than there was a year ago for consumer loans and business loan demand has also dropped off. For example, businesses aren't buying as much new equipment, he said.

"Banks all over the country are experiencing higher credit losses than they normally have as a result of the recessionary economy," he said. "What the TARP capital is doing is allowing banks to replenish their capital positions and improve their liquidity and enables them to be a more active lender in the marketplaces they serve."

But some such as small business owner Laurie Moncrieff are upset that banks that have received TARP funding don't appear to be lending it out.

"They're using it to shore up their own balance sheets and income statements," she said.

Moncrieff, owner and president of Schmald Tool & Die Inc. in Burton, said she isn't a Citizens Republic customer, but she has had issues with another big bank that received TARP funding.

She's had to temporarily lay off some workers and has seen lines of credit cut. She said many other small business owners are frustrated with the current lending environment, especially in Michigan, and may be forced to close their doors if they aren't able to keep or obtain lines of credit.

Moncrieff said banks that have received the funds should be forced to start lending. She said she's been in discussions with the state to create a program to aid struggling businesses.

"The state is working on addressing it," Moncrieff said. "I think the state understands the problem. I think the state wants to address the problem. The big concern is how fast they can get it done. I think we need is today, yesterday."

Many community banks based in Michigan, perhaps as many as 65, have also applied for TARP funding, said Michael Kus, an Auburn Hills attorney and spokesperson for the Michigan Association of Community Bankers.

Kus said he wasn't sure how many of those applications were still pending, but he said many community based banks could use that money to lend.

"The larger banks in many respects have either decided not to lend in Michigan, or they've made their credit standards so tight that it's recently impossible for many of these small businesses to obtain loans from the larger banks," Kus said.

And those businesses are turning to community bankers, which are more likely to be able to lend to a small business owner in this environment, Kus said.

Fenton-based Fentura Financial Inc., which operates The State Bank, Davison State Bank and West Michigan Community Bank, has asked for $10 million under the program. It's application status is unknown and Donald L. Grill, Fentura's CEO, declined to comment.

Kus said Treasury will continue to lend through the program, though the timing is unclear on when to expect more announcements and that the rules could change.